M&S to slash food and clothes prices

Marks & Spencer is to slash the price of its clothing and food to take on the no-frills grocery and fashion stores.

M&S announced the price-cutting drive today after half-year profits slumped by 34 per cent, hit by defections to budget rivals by shoppers faced with higher household bills and an imminent recession.

As M&S chairman Sir Stuart Rose disclosed the slump, annual profits at the low-cost fashion retailer Primark bounced up by 17 per cent, indicating that customers were prepared to pick up clothing – if the price was right.

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Sir Stuart indicated that the store group was planning to reduce the costs of hundreds of items, in attempt to match the public's desire for cheaper goods. "In the current market, customers are increasingly concerned about value and we know that we have to respond accordingly," he said.

M&S sales slid 5.7 per cent and profit fell to £297m for the sixth months to 27 September. Trading last month was volatile and M&S remained cautious about the outlook for its business, Sir Stuart said. But he insisted M&S, which is under pressure from budget competitors, was not in trouble.

"I think it's only a reflection of what we've being saying for the last six months - times are tough," he said.

"We talk to our customers all the time and they tell us: 'Look, we feel your squeeze'."

M&S said its "dine in for £10" and weekend promotions promotion were tempting customers back to its stores.

Profits at Primark soared to £233m, said its parent company ABF, which also owns Twinings and Allied Bakeries, which makes Kingsmill bread.

Renowned for selling T-shirts for as little as £1, Primark opened four more stores in the UK in the last year, bringing its global tally to 181.

Its strong sales came despite the weaker economy and a poor summer. "This performance was against a background of declining consumer confidence which highlights both the continued growth of the value clothing sector's share of the retail market and Primark's ability to thrive in difficult economic circumstances," ABF said in its annual report.

Primarkls best-selling items were V neck jumpers for £4, tank tops for £6, oversized cable knitwear for £10

ABF's annual pre-tax profits rose 3 per cent to £632m. George Weston, ABF chief executive, insisted that the group would not slow its expansion plans as the economy worsened. "While faced with a general economic downturn, we remain committed to the group's expansion and development, most notably in sugar and Primark," he said.